Commission calls for delays to ratings of sovereign debt
Proposal would give countries time to respond but agencies argue it would harm investors.
Credit-rating agencies could be asked to delay publishing their ratings of sovereign-debt issues, to allow countries to mount challenges. A European Commission consultation paper issued on 5 November suggests that when a country issues sovereign debt, it should be allowed up to three days to examine the assessments by credit-rating agencies before they are published.
European politicians blame ratings agencies for exacerbating the eurozone’s sovereign-debt crisis in the first half of 2010 by downgrading some countries’ debt. Standard & Poor’s downgraded Greek government debt to junk status in April, driving up the price that Greece had to pay to borrow funds. The Greek government said at the time that the downgrade did not reflect Greek government efforts to reduce its deficit.
Didier Reynders, the finance minister of Belgium, which holds the rotating presidency of the Council of Ministers, has suggested that ratings agencies should be fined if they produce unjustifiably negative ratings.
The Commission is floating the idea of requiring credit-rating agencies to inform the country for which they are in the process of issuing a rating “at least three working days before the publication of the rating”. This, it suggests, would give the country time to point out “any factual errors” in how the rating was calculated and “any new developments”. The paper says this delay would be justified “due to the potentially severe consequences a downgrade may have”.
Ratings agencies are against the idea. They argue that publishing ratings as soon as they are ready is part of their duty to ensure investors are trading with the most accurate information. A spokesman for Moody’s, one of three companies – along with Standard & Poor’s and Fitch – that dominate the ratings market, said: “Any protracted delay in communicating our views to the market is to the detriment of investors, who would be trading on outdated information.”
Conflicts of interests
The consultation is open until January 2011. One of the issues highlighted in the paper is the potential conflict of interest with the ‘issuer pays’ model: agencies, which are paid by companies issuing debt instruments, have been accused of providing excessively favourable ratings, especially for complex structured products such as repackaged mortgages or credit-card debts. Ratings agencies argue that all business models, including ‘investor pays’, present potential conflicts of interest.
New rules requiring agencies to register with financial regulators and adhere to rules of conduct were agreed in September 2009 and will come into effect in December. Further changes to the rules are currently being negotiated in the Council and the European Parliament to achieve higher standards of transparency, especially for structured financial instruments.
The chairman of the Committee of European Banking Supervisors has been thrust into the limelight by the banking stress tests.
Giovanni Carosio is a no-nonsense kind of fellow, a characteristic polished by decades in central banking. He has worked on international financial regulation for more than 20 years, latterly – since September 2009 – as chairman of the London-based Committee of European Banking Supervisors (CEBS).
From that position, he became the face of the EU’s first-ever public bank stress tests, unveiled on 23 July in the wake of the Greek debt crisis. In an eagerly awaited press conference, Carosio showed off a near-native British accent while calmly batting off criticism that the parameters chosen had been too soft, as only seven out of 91 banks assessed failed to make the grade.
“Not only are the stress tests that we applied very severe ones, but they also imply very severe losses,” Carosio told reporters. The markets appeared convinced, albeit temporarily. “August was the calmest month we have had in the past four years, thanks to the combined effect of the stress tests and the deal on Basel III,” an EU official says, referring to a package of reforms to international banking laws and regulations announced on 26 July, reforms that Carosio helped to draft.
The situation is very different now, as the Irish banking crisis raised its head again. But do not blame CEBS for that, the same EU official protests: “Stress tests can only photograph the existing situation, and at that time Irish banks had sufficient capital. This is why it is useful to do them often.”
After the stress-test experience, which uncharacteristically threw him into the limelight, Carosio went back to the quiet business of the central banker: “reserved” is the word most frequently used to describe his attitude. Nevertheless, journalists who have come across him say he is warm and always helpful.
Colleagues, for their part, are full of praise. “He does not talk much but, when he does, he is very competent. He is doing a great job at CEBS,” says a high-ranking colleague at Banca d’Italia, Italy’s central bank. “On every topic, when Giovanni speaks other people listen – and there is this feeling that people have to take a stance on what he says, as he is an opinion-maker,” says an official who has seen him at work in the closed-door meetings on the Basel package. At CEBS, another associate says, his chairmanship style is “to advance decisions, but never to push people into a corner – he is a very smooth operator, a real consensus-builder”.
He is also described as someone who likes to keep his private life very much to himself. News that he has four children came as a surprise to another acquaintance, a European Commission fonctionnaire who has regularly rubbed shoulders with him in recent years. “He speaks little about his personal life, and I do not even know which football team he supports, if any,” he says.
Born in 1945 in Galatina, in southern Italy, from a Neapolitan family, Carosio moved to Rome, where, in 1967, he graduated with top marks in economics. That achievement opened the doors to Banca d’Italia (or ‘Bankitalia’, as it is often known), which arguably remains Italy’s most respected institution, despite the damage inflicted on its reputation by the controversial management of Antonio Fazio, who resigned as governor in 2005.
Fact File
Curriculum Vitae
1945: Born, Galatina 1967: Graduated from La Sapienza University, Rome 1969-70: Postgraduate studies at King’s College, Cambridge 1970-85: Economic research department, Banca d’Italia 1985-95: Banking supervision department, Banca d’Italia 1987-: Member, Basel Committee on Banking Supervision 1993-2004: Head of banking supervision department, Banca d’Italia 2004-06: Managing director for central banking and markets, Banca d’Italia 2006-07: Managing director for banking and financial supervision, Banca d’Italia 2007-: Deputy director-general, Banca d’Italia 2009-: Chairman, Committee of European Banking Supervisors 2009-: Member of the Financial Stability Board established by the G20
Over 65 years of republican government, two Italian presidents and two prime ministers have issued from Palazzo Koch, Bankitalia’s imposing 19th century headquarters in central Rome.
It may soon produce another, if the sitting governor Mario Draghi – who has done much to restore the institution’s standing to pre-Fazio levels – can ever be persuaded to fill the void that would be left if Silvio Berlusconi were to fall.
“Carosio belongs to the class of civil servants that has kept up Italy’s credibility through decades of upheavals,” a diplomat remarks.
His career started in 1970, after an 18-month hiatus in military service and a postgraduate stint at King’s College, Cambridge, supported by a scholarship from Bankitalia. Starting at Bankitalia’s research department, he moved to banking supervision in 1985 and gradually worked his way up the ranks, becoming deputy director-general in 2007 and Italy’s point-man in international financial organisations. As well as being a senior member of CEBS and of the Basel committee, Carosio sits on the Financial Stability Board, the financial-reform task-force set up by the G20 in the wake of the 2008 crisis, which is chaired by his boss, Draghi.
Their relationship is described as being based on “mutual respect and close co-operation” by Bankitalia sources, who stress that Carosio’s influence bears heavily on the Considerazioni Finali, the Bankitalia annual report released every 31 May, a key event in the Italian political calendar.
“Carosio is particularly competent on supervisory issues and his voice is strong on international dossiers,” officials explain. He has also participated in the austerity drive that Draghi introduced in 2009, when all salaries of the bank’s governing council were cut by 10%. Carosio is now concentrating on the transition that will see the CEBS become the European Banking Authority (EBA), the watchdog set up by new European financial-supervision framework that is due to start work on 1 January, as well as on laying the groundwork for the implementation of the Basel rules and the transformation of the stress-tests into a regular exercise, as mandated by EU finance ministers.
But he will not be there to reap the fruit of his work because – at 65 – he is too old to run for the EBA chair, forcing him to return to Bankitalia at the end of the year. His age brings more surprised reactions from people who have worked with him: “I would have easily said he was seven or eight years younger,” an EU official remarks. Colleagues in Rome say they will be happy to have him back, as “he is one of our best and we want to keep him here”.
The impasse on the EU’s 2011 budget may, however, prove to be a fly in the ointment. José Manuel García-Margallo, the Spanish conservative MEP who has overseen legislation on the EBA, says everything is “ready to start from day one”. But if funding is not agreed, the transition to the new regulatory framework risks being arrested, leaving Carosio’s CEBS legacy in limbo.
Three books examine the complex system of war-crimes tribunals in the Balkans and further afield.
Last June, the European Union’s member states decided to proceed with ratification of a crucial pre-accession agreement with Serbia; MEPs on the foreign affairs committee backed the move last week, with a plenary vote expected next month. In October, the member states decided to refer Serbia’s application to join the EU to the European Commission for an assessment, a precondition for the opening of accession talks. Three recent books suggest that relaxing the international pressure on Belgrade may not be the best way of promoting the arrest of Ratko Mladic, the Bosnian Serb wartime commander who has been indicted for genocide.
Two ad-hoc tribunals have been set up by the United Nations – both in The Hague – to deal with the criminal responsibility for the genocides in the former Yugoslavia and in Rwanda in the 1990s. Both tribunals are set to close in the coming years, but they have had a lasting effect on international jurisprudence.
Also as a result of these genocides, the international community has set up a permanent institution outside the UN framework, the International Criminal Court (ICC), which is designed to deal with the most egregious war crimes in cases where the concerned governments fail to act. Local courts in the Balkans and in Rwanda have taken on cases, and created structures to deal with them, in ways that would have been impossible without the guidance from the international tribunals.
International courts face two specific challenges that domestic courts do not normally encounter: legitimacy and enforcement. The ICC and the tribunals for Yugoslavia (ICTY) and Rwanda (ICTR) dealt with the first challenge by trying to be “truly independent and fully international in origin and operation”. This is part of their attempt, as Victor Peskin explains in his “International justice in Rwanda and the Balkans”, to set themselves apart from the victors’ justice meted out by the Allies after the Second World War.
Web of influence
For enforcement, these courts inevitably rely on state co-operation from interested outside governments, from the states on whose territory crimes were committed, or indeed from the states in whose name they were committed. That, Peskin points out in his scholarly yet readable account, has created a complex web of mutual influence between the tribunals and international and domestic actors.
International pressure is critical to success, Peskin considers. It was the threat by the United States to withhold assistance to Serbia that prompted successive governments to step up co-operation with The Hague. The EU’s refusal to let Serbia advance in its bid to join the Union was another form of pressure.
From studying the cases of Rwanda, Croatia and Serbia, Peskin concludes that co-operation with international justice will rarely happen in the absence of “decisive international community intervention” – yet such outside intervention also has its limits, especially when powerful domestic forces are mobilised in opposition to the tribunals.
Fact File
CATCHING KARADŽIC
Nick Hawton’s “The quest for Radovan Karadžic” is a ground-level exposé of the almost complete cluelessness of the Western spy services that were in charge of hunting the Bosnian Serb wartime leader and indicted war criminal.
At a time when Bosnia and Herzegovina was under the control of tens of thousands of NATO troops (replaced in 2004 by EU peacekeepers whose numbers have now dropped to around 1,600), hundreds of intelligence operatives were unable to pinpoint Karadžic’s whereabouts.
To make up for the failure, NATO and EU peacekeepers engaged in theatrical, pointless raids on the Karadžic? family home in the ski resort of Pale, outside Sarajevo; there are some truly farcical scenes in this book, written by the BBC’s correspondent in Bosnia and Serbia.
Karadžic was finally arrested in 2008 on a city bus in Belgrade, where he had been living under an assumed identity.
The quest for Radovan Karadzic
By Nick Hawton(240 pages) Hutchinson, €15
The most spectacular result of pressure on Serbia was the arrest and eventual transfer to The Hague of Slobodan Miloševic, the first sitting head of state since the Nuremberg trials to be called before an international court to face justice for war crimes. But his trial was a fiasco, dragging on for four long years, delayed by a court decision to allow Miloševic to represent himself, and by numerous absences owing to illness, only to end abruptly when the former Serbian strongman died in detention in March 2006.
Judith Armatta, a reporter and human-rights campaigner, has written a detailed and thorough account of the trial that is certain to answer more questions than any lay reader is ever likely to have. As a record of the proceedings, and of the substance of Miloševic’s presumed crimes, “Twilight of impunity” is invaluable.
International justice in Rwanda and the Balkans: virtual trials and the struggle for state co-operation
By Victor Peskin (296 pages) Cambridge University Press, €25
Twlight of impunity: the war crimes trial of Slobodan Miloševic
By Judith Armatta(576 pages) Duke University Press, €30
Leading Liverpool supporters’ trust Spirit of Shankly have clarified their stance on the club’s decision to furlough non-playing staff.
Liverpool courted controversy on Saturday by announcing they would turn to the government’s job retention scheme during the suspension of the Premier League.
They followed the lead of Tottenham, Newcastle, Bournemouth and Norwich in doing so, despite declaring pre-tax profits of £42m for last season in February.
The SOS group said that guaranteeing lower-paid staff would continue to receive their wage in full “has got to be seen as a positive”, which was construed as praise for and defence of the club’s actions.
But they released a further statement on Saturday evening to clear up the confusion, describing it as “wrong” that the scheme was to be used, but that their priority was for all non-playing staff to be paid their wages in full.
“Spirit of Shankly want to make it clear that we have not refused to criticise the club,” it began. “Our chair has been misquoted and misrepresented by a journalist on Twitter looking for clicks.
“Today, Saturday 4 April, Liverpool announced they are to furlough non-playing staff. We know no details, yet were asked for a statement. One was given in good faith saying for us the priority is LFC staff being paid 100% of their regular wage.
“During this crisis, many workers have lost or will lose their livelihoods. When it began, SOS contacted LFC to seek assurances that all non-playing staff would be guaranteed to receive 100% wages. We were told this would happen and we made a statement. This was and continues to be our priority.
“Many of our members and the committee have raised concerns that the club intend to use taxpayer’s money to pay staff. We can all agree this is wrong, but again for SOS the prerogative is protecting jobs. It is the club who made the decision on how to pay their staff and they are the ones who need to answer why, if they decide to furlough.
“Our belief is that no profit-making organisation should be relying on tax-payer subsidies in times of crises, yet football as a money-making industry has been singled out. It is an easy target for the authorities. We are contacting the club now and asking them to explain their position and reasoning. We will report back as soon as we hear back.
“SOS have been working tirelessly in our communities over the past couple of weeks delivering food bags to those most in need and being here for people. Where were the journalists then looking for quotes?”
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The Professional Footballers’ Association says Premier League players want to make “significant financial contributions” but warned a 30 per cent pay cut would have far-reaching implications.
The Premier League met with all clubs, the PFA and LMA in a conference call on Saturday afternoon to discuss its suggestion of wage deductions or deferrals as they look at the financial impact of the coronavirus crisis.
Top-flight professionals have been coming under increasing pressure to take a drop in pay, especially with clubs from the Premier League to League Two placing non-playing staff on furlough leave under the Government’s coronavirus job retention scheme.
A PFA statement on behalf of the Premier League players said: “All Premier League players want to, and will, play their part in making significant financial contributions in these unprecedented times.
“Going forward, we are working together to find a solution which will be continually reviewed in order to assess the circumstance of the COVID-19 crisis.
“The players are mindful that as PAYE employees, the combined tax on their salaries is a significant contribution to funding essential public services – which are especially critical at this time. Taking a 30 per cent salary deduction will cost the Exchequer substantial sums. This would be detrimental to our NHS and other government-funded services.”
Health Secretary Matt Hancock weighed in on the topic during the government’s daily briefing on Thursday when he said Premier League players should “take a pay cut and play their part”.
The PFA addressed those remarks, as the statement continued: “The proposed 30 per cent salary deduction over a 12-month period equates to over £500m in wage reductions and a loss in tax contributions of over £200m to the government.
“What effect does this loss of earning to the government mean for the NHS? Was this considered in the Premier League proposal and did the Health Secretary, Matt Hancock factor this in when asking players to take a salary cut?”
The PFA says it is happy to continue talks with the Premier League, which on Friday pledged an advance of £125million to the EFL and National League as well as a £20m donation to the NHS and other community causes.
The PFA statement added: “£20m is welcome, but we believe it could be far bigger.
“The EFL money is an advance. Importantly, it will aid cashflow in the immediate, but football needs to find a way to increase funding to the EFL and non-league clubs in the long-term.
“Many clubs require an increase in funding just to survive. We believe in our football pyramid and again stress the need for solidarity between all clubs.
“Going forward, we are working together to find a solution which will be continually reviewed in order to assess the circumstance of the COVID-19 crisis.”
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The FAI have announced that Mick McCarthy has been replaced as Republic of Ireland manager.
Stephen Kenny, who has been in charge of the nation’s Under-21 side for the past two years, has been confirmed as McCarthy’s replacement.
48-year-old Kenny has had an extensive coaching career despite his relatively young age, having taken up his first management job at the age of just 25.
He has won Irish league titles with Dundalk (on five occasions) and Bohemians.
McCarthy had been out of contract with Ireland after Euro 2020, with a play-off against Slovakia still to be negotiated – but that fixture has been pushed back, in line with the whole tournament being postponed to next year.
Therefore, the FAI have decided to bring Kenny’s appointment forward by a few months in order to allow him to prepare for the qualifier.
Gary Owens, interim CEO of the FAI, said in a statement: “These are exceptional times in Irish life and Mick has taken that into account in agreeing to vacate the post early.
“On behalf of the FAI, I wish to express our gratitude to Mick for his service and commitment to our national team throughout his career and particularly in his second spell as Ireland manager. We wish Mick and his staff well and we thank them all for their hard work in this European Championship campaign to date.”
61-year-old McCarthy had been in charge of Ireland since 2018 after a six-year spell with Ipswich Town.
His last match as Ireland boss was a Euro qualifying draw with Denmark, which saw them miss out on an automatic place in next summer’s event.
Liverpool have announced they have placed some non-playing staff on furlough as the Premier League remains suspended due to the ongoing coronavirus pandemic.
The announcement comes as Premier League clubs are meeting with representatives of players and managers to discuss possible wage cuts during the suspension.
With regards to those furloughed, a club statement said: “The club have confirmed those staff will be paid 100 per cent of their salaries to ensure no member of staff is financially disadvantaged.
“Last month the club also confirmed that it would pay its matchday and non-matchday staff while the Premier League is suspended.”
The statement added: “Even prior to the decision on staff furloughing, there was a collective commitment at senior levels of the club – on and off the pitch – with everyone working towards a solution that secures jobs for employees of the club during this unprecedented crisis.
“There is ongoing active engagement about the topic of salary deductions during the period matches are not being played to schedule. These discussions are complex and as a result the process is ongoing.”
The club also said a “significant” donation had been made to St Andrews foodbank in north Liverpool from first-team players and the Liverpool FC Foundation, while the club have launched their own foodbank appeal.
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BRANDON, FL — The Hillsborough County Pet Resource Center has been awarded custody of more than 300 dogs, one of the largest animal seizures in the county’s history.
The ruling comes after a yearlong court fight in which Hillsborough County alleged the dogs were living in unsafe and unsanitary conditions as part of an animal-breeding business in Tampa. The court order provides custody of the dogs to Hillsborough County and enjoins the owner of the business from ever possessing dogs.
Monday morning, animal control officers began the process of bringing the dogs to the Pet Resource Center, 440 N. Falkenburg Road, where they will be assessed and undergo any needed medical treatment.
The large influx of dogs will create stresses at the Pet Resource Center, which was already over capacity. State law requires the dogs be kept at least 30 days in case of appeal, meaning none of the seized dogs can immediately be adopted by the public or sent to rescue groups. The dogs are mostly small breeds like Maltese, Shih Tzus, terriers and schnauzers.
To help make room, Pet Resource Center officials are appealing to the public to adopt dogs already at the shelter. All fees will be waived for dogs. In addition, the shelter will take in dogs from the public only for emergencies for at least the next few days.
The Pet Resource Center also is working with other animal shelters and rescue groups to help reduce the shelter’s current population of dogs. Shelter managers anticipate a need for dog toys and blankets and would welcome donations of those items from this list. Monetary donations may be made through the Hillsborough County Pet Resources Foundation Inc. Please designate the donation for the aid of the more than 300 dogs.
The Pet Resource Center is open from 10 a.m. to 7 p.m. Dogs and cats can be viewed online but must be adopted in person at the shelter.
ARLINGTON HEIGHTS, IL — The deaths of seven people who died after taking potassium cyanide-laced Tylenol products 37 years ago are still under investigation by police in Arlington Heights, where three victims of the 1982 Tylenol Murders died. Multiple suspects in the case remain, and police still hold out hope of making an arrest nearly four decades later.
“This is still an active investigation, and we are moving forward with it,” Arlington Heights Police Department Commander Joseph Pinnello told Patch just before the 37th anniversary of the crime that resulted in the creation of tamper-proof packaging for products sold at stores nationwide.
‘When We Lost Our Innocence’: Nurse Who First Saw Tylenol Connection Remembers Murders
“We are constantly reviewing documents and files related to the case and coming up with new approaches with the hopes of eventually arresting someone,” Pinnello said.
In one of the nation’s most well-known cold cases, seven people across the Chicagoland region died over a three-day span from Sept. 29 to Oct. 1, 1982. All seven deaths were traced back to various bottles of Tylenol capsules that had all been laced with cyanide.
Three members of the Janus family — Adam, Stanley and Teresa — died after taking pills from the same bottle on Sept. 30, 1982 in Arlington Heights. The other victims were Mary Kellerman, a 12-year-old girl from Elk Grove Village; Mary McFarland; Paula Prince and Mary Reiner.
The deaths prompted a nationwide recall of all Tylenol products, and for years after were believed to be the basis for a number of “copycat” crimes in which over-the-counter medication had been tampered with and people died from the poisonings.
While a man named James Lewis spent 13 years in prison for writing an extortion letter to Tylenol maker Johnson & Johnson in connection with the murders, no one has ever been arrested in connection with the seven murders.
Pinnello said that while changes occur in the staffing at the police department, the importance of one day solving the Tylenol Murders remains a constant.
“We have retirements, changes in positions and are right now bringing in new investigators to bring them up to speed on the investigation,” he said.
The investigation has not narrowed on any specific suspect in the last year, however.
“We are not focusing (the investigation) on one person or another,” Pinnello said. “It would hurt our investigation if we weren’t looking at many different avenues.”
The Tylenol Murders are one of those tragic events in American history that some, like former Arlington Heights village nurse Helen Jensen who first saw the Tylenol connection in all seven deaths, say was the moment in time in which the country “lost its innocence.”
Making it just as important now as it was in 1982 to find the person responsible.
“Even after 37 years, we are hopeful for an arrest,” Pinnello said.
Related: Timeline, Theories in 1982 Tylenol Murders
MICHIGAN — A Michigan judge has issued an injunction to block state’s ban on flavored e-cigarettes, according to reports.
The harm done to vape businesses outweighs the state’s interest in stopping young people from using the products, Court of Claims Judge Cynthia Diane Stephens said in her ruling, as reported by the Detroit Free Press.
Stephens said the plaintiff in the suit, A Clean Cigarette, has been hurt financially by the ban. “In essence, the emergency rules will destroy plaintiff A Clean Cigarette’s business as it currently exists,” she rule.
Several elected leaders and community health officials spoke out against the ruling Tuesday, including Michigan Attorney General Dana Nessel.
“We are resolute in our efforts on behalf of Governor Whitmer and the Michigan Department of Health & Human Services to protect the health of Michigan’s children,” Nessel said. “The youth vaping crisis is an urgent public health matter that demands immediate action.”
Nessel said her office plans to ask for the judge’s ruling to be put on hold while he appeals it to the state Supreme Court.
Dr. Joneigh Khaldun, chief medical executive and chief deputy for health for the state health departmet, said there is “no question” that youth vaping is a concern.
“This ruling is deeply concerning and a threat to Michigan’s public health,” Khladun said. “There is no question that youth vaping is a public health crisis. The data is overwhelming, and we’re getting new information every day that reinforces that the Governor and (health department) were correct to take swift action to protect our kids from the harmful effects of vaping.”
Michigan was the first state to implement a ban on non-tobacco-flavored vaping products. The ban took effect in mid-September and gave retailers 14 days to get flavored e-cigarette products off the shelves.